New York to Launch For-Profit Hospital Pilot Program

New York has strict regulations for how healthcare and medicine can be delivered within its confines, but a new program may loosen the rules around for-profit entities owning hospitals in the state.

Embedded within New York Gov. Andrew Cuomo's 2013-14 executive budget (pdf) is a new pilot program that would allow for-profit corporations to own and operate two hospitals in the state, which is subject to approval by New York's Public Health and Health Planning Council. More specifically, the proposed pilot program will allow one business corporation to operate a hospital or hospitals in Brooklyn and another corporation to operate a hospital "elsewhere in the state."

In order to become one of the for-profit hospital operators, Gov. Cuomo's budget said the business must be affiliated with a PHHPC-approved academic medical institution.

Law firm EpsteinBeckerGreen said the pilot program "is a potentially significant development in New York" because of how regulated the hospital sector is. Under New York law, all owners of a corporation that operate a for-profit hospital must be "natural persons." This essentially prevents investor-owned corporations from owning and operating hospitals. However, under the pilot program proposed in the budget, those restrictions would be temporarily suspended, meaning for-profit hospitals could directly invest in a hospital without all members of the corporation being a natural person.

EpsteinBeckerGreen attorneys said there would be several restrictions on the two corporations that would be included in the demonstration. For example, their corporate purposes and powers would have to be limited, and all board members have to consider "specified public health metrics" when making decisions.

No timetable was given for when the pilot program process would begin.